The International Underwriting Association (IUA) has expressed support for the Financial Conduct Authority’s (FCA) decision not to proceed with proposed changes to the rules governing the publication of regulatory investigations before they are concluded.
The FCA had previously suggested introducing a “public interest” test for disclosing ongoing inquiries into alleged misconduct, replacing the current “exceptional circumstances” test.
The IUA had raised concerns that the proposed changes would have increased the likelihood of premature disclosures, leading to market speculation, reputational harm, and financial difficulties for firms that might later be cleared of wrongdoing.
In its response to an FCA consultation last year, the IUA warned that lowering the threshold for publication could create an unjustified perception of systemic issues in the financial sector, potentially affecting companies not under investigation.
The association also cautioned that the proposal could lead to higher costs and reduced availability of directors and officers (D&O) insurance for FCA-regulated firms.
To put into perspective, the FCA traditionally disclosed investigations into firms only under "exceptional circumstances." In February 2024, as a bid to enhance transparency and deter misconduct, the FCA proposed a shift towards routinely announcing investigations when deemed in the public interest, as outlined in Consultation Paper CP24/2.
The proposal faced substantial opposition, with industry leaders and lawmakers arguing that publicizing investigations could unjustly damage the reputations of firms, especially since many investigations conclude without enforcement action.
Notably, data indicated that over half of FCA investigations end without further action, raising concerns about potential harm to firms ultimately found compliant.
Critics also feared that such disclosures could destabilise financial markets by causing unwarranted panic or loss of confidence in firms under investigation. There were apprehensions that early disclosure might undermine the principle of due process, penalising firms before any wrongdoing is confirmed.
Helen Dalziel (pictured), IUA director of public policy, said the organisation’s members were strongly opposed to the FCA’s plans and welcomed the decision to retain the existing rules.
Dalziel noted that maintaining the current approach reduces the risk of negative publicity creating a prejudicial environment where firms are assumed guilty before investigations are completed. She said that the presumption of innocence is a fundamental principle of criminal law and that being linked to an ongoing inquiry could damage a company’s market reputation.
The IUA said it will continue to monitor the FCA’s consultation process under "CP24/2: Our Enforcement Guide and publicising enforcement investigations - a new approach" and will review the final policy when it is published later this year.
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